A trade dispute with the United States over tariffs is having a chilling effect on the sale of condominium apartments and houses in Canada, according to a report from one of the country's largest banks.
More prospective homebuyers retreated to the sidelines in March as tariffs on Canadian goods entering the United States took effect and Canada implements trade duties of its own in retaliation, according to the Royal Bank of Canada.
"This drove home resales down materially for a second straight time in many markets, reaching cyclically lows in southern Ontario, which is especially vulnerable to trade turbulence," bank economist Robert Hogue said in a report. "Several local real estate boards reported weaker home prices in March, including the Toronto region, Hamilton, Kitchener-Waterloo, Cambridge, Vancouver and Fraser Valley. Even in Calgary, prices flattened."
The U.S. expanded its tariff program last week to include a 10% baseline trade tax after placing 25% tariffs on Canadian steel and aluminum imports. Canadian Prime Minister Mark Carney said on April 3 that Canada will match U.S. auto tariffs by adding a 25% tariff on vehicles imported from the United States, but the tariffs won't apply to auto parts, as factories in the two countries often combine to assemble cars in Ontario and Michigan.
The dispute over tariffs also is affecting the hospitality industry. Canadians are committing to fewer short-term rentals as the back-and-forth over trade duties with the United States intensifies. Stays by Canadians in the United States declined 10.3% in March compared to the same month last year, short-term rental analysis firm AirDNA said.
On the housing front, March homes sales in greater Toronto were down 23.1% on a year-over-year basis, a drop the Toronto Regional Real Estate Board attributed to tariffs. The Vancouver area's existing home sales also saw a 13.4% drop from a year ago, 36.8% below the 10-year seasonal average.
"If we can set aside the political and economic uncertainty tied to the new U.S. administration for a moment, buyers in Metro Vancouver haven't seen market conditions" such as these in years, said Andrew Lis, director of economics and data analytics with the Greater Vancouver Realtors, in a commentary.
Lis added that "prices have eased from recent highs, mortgage rates are among the lowest we've seen in years, and there are more active listings on MLS [multiple listing services] than we've seen in almost a decade. Sellers appear ready to engage, but so far, buyers have not shown up in the numbers we typically see at this time of year."
Hogue noted the United States spared Canada additional tariffs last week. Canada and Mexico trade covered under agreements with the United States were exempt.
"That could lift some of the fog eroding market confidence and holding back activity. However, we don't see a meaningful rebound as long as trade uncertainty lingers," the economist said.